National bank notes a dominant series in marketplace

By Arthur L. Friedberg

Published: Mar 18, 2016, 8 AM

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Original images courtesy of Heritage Auctions.

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This $5 note of the First National Bank of Grand Rapids is the sole survivor from a Michigan bank that issued only First Charter notes before liquidating in 1883.

Images courtesy of Heritage Auctions.

A six-week span from mid-March to the end of April has three auctions that, in their floor sessions alone, offer more than 3,300 lots of United States paper currency from Colonial times forward. Often unrecognized is that national bank notes take up a preponderance of the space in most auctions. The three current sales, for instance, offer close to 1,300 nationals, or about 40 percent of the total number of lots. Every auction naturally has its assortment of large-size type notes, better small-size notes and at least a smattering of fractional, Colonial, Confederate and, in growing numbers, obsolete notes.

Often unrecognized is that national bank notes take up a preponderance of the space in most auctions. The three current sales, for instance, offer close to 1,300 nationals, or about 40 percent of the total number of lots. National bank notes are the largest and one of the most enduring issues of American paper currency. They were first issued in 1863, making them among the first federal issues, and did not end until 1935. Of the 14,348 chartered national banks during this period, more than 12,000 issued notes.

It was not too difficult — a chartered bank could issue its own notes (provided by the Treasury Department) in an amount up to 90 percent of the par value of the United States bonds it deposited with the government as security. A full accounting of the massive scale of production and redemption was compiled by Dr. Franklin Noll for the Economic History Association. It shows a total issue amount for the period of $17 billion, with a considerable amount, $140 million, of notes that have not been redeemed.

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More than 40 types with over 325 individual catalog numbers are identified in Paper Money of the United States. It is safe to say that high among the impossible tasks in numismatics is amassing a complete collection of national bank notes.

Nationals are experiencing a resurgence after several years in the doldrums. They are making headlines sale after sale for several reasons. Sometimes it is because a note has crossover appeal to U.S. type collectors, such as with the surprising number of government signature combinations, especially for examples of First and Second Charter Period notes for which fewer than 10 pieces are known.

National bank notes have more potential for new discoveries than any other field of paper money. With so many issuers and so many notes hidden away for generations, it is not usual to find a note never before seen from a particular bank. They are a delight for fancy number collectors, too. So many bank executives saved the first sheets of notes with their signatures on them that low serial numbers are relatively common and affordable. Of course, there are the “trophy notes,” exotic and rare issues from elusive states and territories such as Alaska, Hawaii, Puerto Rico and Indian Territory.

On a more mundane level, the vast majority of national bank notes are cheap and easy to collect in a sensible manner by either state, city, county or bank. The appeal is not in their price alone, but in the pairing of a reasonable cost and a decent amount of rarity.